Green Banks help secure low-cost capital for clean energy projects including solar
at favorable rates and terms to both traditional and otherwise challenging market
segments.

The availability of low-cost financing is a critical factor for achieving cost-competitive
solar energy. Reduced interest rates, extended term lengths, and low or no money down
finance offerings can help ensure that solar adopters achieve energy bill savings,
provide pricing certainty, and enable investors to achieve attractive investment returns.
Green Banks are one mechanism used to deploy low-cost capital for solar energy projects
by offering favorable rates and terms to both traditional and underserved markets.
According to the Coalition for Green Capital (CGC)—a non-profit Green Bank advisory
organization—a Green Bank is fundamentally “a focused institution, created to maximize
clean energy adoption.” Green Banks are often established to complement existing financing
institutions by attracting and leveraging private capital that otherwise might be
unavailable to a particular market or segment.

U.S. Green Bank Institutions

As of 2017, several Green Banks in the United States have been established by enabling
legislation at the state and local level, with several more under development. Examples
of existing Green Banks in the United States include:

Based on the early successes of these leading clean energy finance institutions, there
are a number of other jurisdictions in the United States exploring the formation of
a Green Bank as well as several international development efforts underway.

Green Bank Products

There are a variety of financial products that may be offered by a Green Bank. These
products can be targeted to end users such as a home or business owner as well as
other finance providers such as retail and investment banks. Connecticut Green Bank,
for example, has driven growth in its residential and commercial segments through
a residential solar loan and lease program, credit support mechanisms (e.g. credit
enhancements) for energy efficiency and solar , and a commercial property assessed
clean energy (PACE) product for a variety of different energy conservation measures.
The New York Green Bank offers a similar product list which includes credit enhancements,
a multi-developer aggregation service (bundling of multiple smaller solar investments),
traditional loans, and combination product of the above. A generalized representation
of the types of products offered by Green Banks is shown below (image courtesy of
Connecticut Green Bank). Through these products, Green Banks can help to help secure
private capital by a number of different means including lowering risks or reducing
transactional costs.

Green Bank Formation

State and local governments have established Green Banks under a variety of different
structures, legislative directives, and funding sources. For example, Connecticut
Green Bank is capitalized by a $.001/kilowatt-hour (kWh) surcharge to households in
their electricity rates (resulting in a surcharge of about $10 per year per household),
while the Montgomery County Green Bank received an approximate $14 million grant from
the county that was part of a local utility merger process. As another example, the
State of Nevada recently enacted the Nevada Clean Energy Fund (another term for a
Green Bank) that established the authority and charter for the institution, but requires
the Fund’s Board of Directors to be responsible for securing the necessary startup
and capitalization dollars to launch the fund. Under the Nevada Clean Energy Fund
model, a number of different sources can be targeted for startup and capitalization
of the fund, including federal, state and private grants and bonds, and foundational
support and high net worth individuals among others. In general, the implementation
of a Green Bank typically follows a process of an early startup phase in which the
institutional processes are put in place followed by a launch of the initial product
to eventually expansion into multiple products and sectors.

In July of 2017, NREL, CGC, and the Nevada Governor’s Office of Energy co-hosted a
one-day workshop with a number of Nevada stakeholders that was a key first step in
implementing the Nevada Clean Energy Fund. The discussions centered around the Clean
Energy Fund’s organization structure, governance, board members and the desired knowledge
base, long term funding options, and consideration of the different potential products
to be offered. The workshop materials can be found here.

Green Bank Investment Statistics

Despite a comparatively short track record, Green Banks have proven to be an effective
mechanism for deploying capital. As of 2016, the most mature Green Banks in the country,
in Connecticut and New York, have collectively invested nearly $575 billion in total
clean energy investment. These investments also mobilize private sector investment
into a project by reportedly three to six times the amount of public sector dollars
at work. The ability to attract and leverage a greater amount of private dollars is
often one of the hallmarks and typical motivations for establishing a Green Bank.